Why a Rare U.S. Military Cash Transfer to Canadian Mines?
The United States has voiced growing concern about its reliance on its main competitor. China restricts mineral exports and controls the world’s mineral supply. Thus, the two nations fear a Taiwan conflict. The U.S. government considered using the DPA to finance Canadian mining businesses two years ago. Last year, it made a funding guarantee, and last month, it officially unveiled the initial projects.
The announcement was about a co-investment between Canada and the United States, but the bland language of the press release barely touched on the innovative nature of the news. U.S. military cash. The fact that the Canadian government is funding Canadian mining corporations is not unusual. It’s considered the first time in the 74-year history of the U.S. Defense Purchase Act (DPA), which granted the president expanded authority to fund or purchase specific products for national security reasons that the American military is sponsoring these programs.
“It’s a historic move by the U.S. government,” commented Ben Steinberg, a former U.S. government employee and current member of a coalition of battery-maker companies. “These materials are essential for the U.S. military’s combat capabilities and national security.” That’s a big step. In 2022, the United States began reviewing many Canadian applications. The Canadian government chipped millions after asking for product presentations, thorough applications, and two winners.
What’s the Catch? U.S. Military Cash Transfer to Canadian Mines
There are currently no conditions tied to the cash. Grant monies help businesses finish feasibility studies and secure permits. The U.S. military may request these supplies in a national security crisis like a trade war or an all-out Asia-Pacific war. This is specified in the Canadian Defence Production Act, which authorizes the acquisition of raw materials for a NATO partner. Put another way, the United States military might skip the line and go straight to the front of the queue.
U.S. military cash, An awardee firm said it would pay the market rate if the U.S. government became a client per its grant agreement. Fortune Minerals of Ontario has spent $137 million on a southern Canadian processing plant and a Northwest Territories cobalt-gold-bismuth-copper mine.
The sudden decline in crucial commodity prices induced by rising production at Chinese mines stalled the world’s leading markets two years ago. Low prices, poor feasibility studies, and uncertain returns on investment are driving lenders away. “We’ve been living kind of hand-to-mouth for a fairly lengthy period,” said Fortune Minerals president Robin Goad. “The money was not available from banks,” according to him.”Because the capital markets for junior mining have been closed … for several years.”
A Look at the Two Companies Involved
Several years ago, he requested financing for overseas initiatives under a historic defense-industrial treaty, which the U.K. and Australia had just joined. However, he discovered that most U.S. federal departments could not do so. A few months ago, he received word that his project had been tentatively accepted after undergoing a preliminary screening and an extensive request-for-proposals submission. The announcement this month solidified it. With this financing, Goad can complete the final feasibility studies. With the necessary permissions and an environmental assessment, he plans to build on the mine within two years and begin production in 2027.
According to him, the idea that his company would process the minerals domestically rather than export them is likely what garnered the grant. This would mean that the resources would remain under North American sovereignty. Furthermore, he is considering processing resources for Rio Tinto, a mining corporation based in the United Kingdom.
Can Canada Exploit a Vital Mineral Treasure Trove?
A new army division might receive aluminum from Canada every six weeks, enough to power thousands of planes. A few years later, the U.S. changed as the Allies neared victory. Amidst the hysteria of a few years ago, the topic of why U.S. money had established an industry in another country seemed obvious. Politicians and the U.S. industry continue to protest these arrangements, even convening congressional inquiries to address the matter.